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Biotech / Medical : Agouron Pharmaceuticals (AGPH) -- Ignore unavailable to you. Want to Upgrade?

To: sam who wrote (5448)	10/4/1998 2:10:00 AM
From: Steve Fancy	Respond to of 6136

Agouron called tempting target for drug giants By Thomas Kupper STAFF WRITER October 3, 1998 Could Agouron Pharmaceuticals go the way of Hybritech? Twelve years after San Diego's first successful biotech was bought out by Eli Lilly, rumors are circulating on Wall Street that San Diego-based Agouron also will be acquired by one of the big drug companies. Analysts say Agouron, maker of the popular AIDS drug Viracept, talked with DuPont in the past several weeks without reaching a deal. And even if a takeover is not imminent, many on Wall Street believe it could be only a matter of time before DuPont or another company with its own AIDS drugs makes a bid for Agouron. "It doesn't only make sense with DuPont," said analyst Anthony Butler, who follows Agouron for Lehman Brothers in New York. "It makes sense with Abbott, and I think it makes sense with Bristol-Myers Squibb." The success of Viracept makes Agouron attractive. The drug generated $409 million in sales in Agouron's most recent fiscal year, which ended in June, and has become the most popular of the AIDS protease inhibitor drugs. Both Abbott and Bristol-Myers are at work on new, improved protease inhibitors, and both could give their AIDS business a boost by adding Viracept. For now, though, speculation about an Agouron takeover has centered on DuPont. The Delaware-based chemicals giant has a promising new AIDS drug, Sustiva, and is trying to build a presence in biotech. Rumors of a deal between the companies contributed to a recent surge in Agouron's share price, which has risen more than 70 percent since the end of August. Though biotechs in general are recovering from a lengthy slump, Agouron is still one of the top performers. In comparison, the Amex Biotechnology Index has gained about 30 percent since Sept. 1. An Agouron spokesman declined to comment on the possibility of a takeover. The argument in favor of a marriage between DuPont and Agouron is that the combined sales force could "cross-sell" Viracept and Sustiva, because the same customers would be buying both drugs. Agouron already has applied this theory itself by striking a deal to market Remune, an AIDS drug from Carlsbad-based Immune Response Corp. that is in late-stage trials. And while some analysts see Sustiva as potential competition for Viracept, there are studies that suggest the drugs work well together -- a combination some think could become a common AIDS regimen. "DuPont looks like an ideal candidate, because of the launch of Sustiva," said analyst Elise Wang of PaineWebber in New York. "Given Agouron's success, the two look like an obvious combination right now." A takeover of a successful biotech would not be a new story in San Diego. In the 1980s, the region's most successful biotech was Hybritech, which at one time generated half the industry's sales nationwide. Hybritech agreed to be acquired in 1986 by Eli Lilly, which has since sold the company to Fullerton-based Beckman Instruments. Hybritech continues to operate in San Diego, though with a much lower profile. Two of the industry's current powerhouses, both based in the Bay Area, have also sold stakes to major pharmaceutical companies. Roche holds a majority stake in Genentech, while Novartis owns 45 percent of Chiron. Wang said such deals stem from a fundamental paradox of biotech finance. Once companies such as Agouron get a drug on the market, investors expect large profits to justify the risks inherent in drug development. But to sustain their success, biotechs must plow the profits back into research. It is a pressing issue for Agouron, which recently acquired two early-stage AIDS drugs and was already working on several cancer drugs. The company has tried to resolve the financial conflict by proposing a separate "tracking stock" for its cancer research division. That idea is subject to shareholder approval. In theory, the tracking stock would draw a line between the cancer work and Viracept, thus relieving some of the financial tension between the two. The parent Agouron stock would represent Viracept and other AIDS-related work. But Wang said another solution would be to simply sell the company. In the hands of a much larger company, Agouron's research projects would represent a smaller proportion of the budget. Copyright 1998 Union-Tribune Publishing Co.

To: sam who wrote (5448)	10/4/1998 11:57:00 AM
From: John Metcalf	Read Replies (3) \| Respond to of 6136

DuPont expects to net in excess of $3B from selling a fraction of Conoco to the public, then spinning off the balance of the unit to shareholders next year. This revised plan was announced last Monday, and Conoco received its own debt rating of Friday. The rise in Agouron's share price is immaterial to DD's acquisition plans (if there are any). AGPH's shareholder rights plan limits any share acquisition in the market to less than 15% of total shares, or provisions dilutive to the acquirer would be exercised. Agouron has independence now as a profitable company, and would not be sold at less than a significant premium to market, IMHO.